2.1.4 Flashcards
What is the balance of payments (BOP)?
It records all financial transactions made between consumers, businesses and the government in one country with other nations.
What is counted as a positive entry in the balance of payments?
Inflows of a forgein currency such as exports
What is counted as a negative entry in the balance of payments?
Outflows of forgeign currency such as imported goods
What is the main measure of a country’s external trade performace?
The current account of the balance of payments.
What does the current account measure?
The difference between money and credit going in and out of an economy
What is a deficit?
It means that more money is leaving than entering the country.
What is a surplus?
It means that more money is entering the country than leaving.
What is the current account a sum of?
-Net balance of trade in goods
-Net balance of trade in services
-Net primary income
-Net secondary income
What is the current account deficit?
When a country is running external deficit.
Net flow of income from economy’s circular flow.
Current account deficit nations are debtor countries
What are current account surplus?
-External surplus
-Net inflow of income into an economy.
-Current account surplus nations are creditor nations.
What are some causes of current account deficits?
-Poor price and non-price competitiveness
-Strong exchange rate affecting exports and imports.
-Recession in one or more major trade partner countries.
-Volatile global prices
-Booming domestic economy
What are key drivers of globalisation?
-Technology
-Multinational companies
-Lower tariffs
-Improves transport
-Labour mobility
-Capital mobility
What percentage of all output produced globally is exported?
30%
